The Economic Returns to Foundational Literacy and Numeracy: Evidence from Indonesia

Addressing foundational literacy and numeracy in low-income countries is a major global education policy priority. Yet we have little direct evidence on the effect of these skills on adult outcomes. We use panel survey data from Indonesia, where skills are tested in early childhood, and the same individuals are then re-interviewed as adults. After adjusting for rich covariates, one standard deviation higher foundational skills are associated with a 9% increase in adult earnings. This association is partially but not primarily attenuated by controlling for completed schooling. If these correlations can be interpreted as causal, they would imply a large benefit–cost ratio for investments in foundational skills.